The Contribution of State-Owned Enterprises to Climate Change Mitigation in China

In: Climate Law
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  • 1 Faculty of Law, Chinese University of Hong Kong
  • 2 PhD Candidate, Faculty of Law, University of Turku
  • 3 PhD Candidate, Faculty of Law, Chinese University of Hong Kong

China plans the implementation of a nationwide market-based mechanism for greenhouse gas mitigation, appearing thus to replicate the method used most notably in the European Union to price greenhouse gas emissions. However, China’s new mechanism represents only be the tip of the mitigation iceberg. Banking on the unique characteristics of a socialist market economy, China’s government has largely relied on State-Owned Enterprises as a tool for implementing rapid change. In this article, we discuss the role played by Chinese soes to advance the country’s ambitious mitigation objectives. After a general description of the incentives created for emission limitation and energy saving through soe supervision, we highlight the corresponding efforts made in the fossil-fuel, power-generation, and other key mitigation sectors.

Abstract

China plans the implementation of a nationwide market-based mechanism for greenhouse gas mitigation, appearing thus to replicate the method used most notably in the European Union to price greenhouse gas emissions. However, China’s new mechanism represents only be the tip of the mitigation iceberg. Banking on the unique characteristics of a socialist market economy, China’s government has largely relied on State-Owned Enterprises as a tool for implementing rapid change. In this article, we discuss the role played by Chinese soes to advance the country’s ambitious mitigation objectives. After a general description of the incentives created for emission limitation and energy saving through soe supervision, we highlight the corresponding efforts made in the fossil-fuel, power-generation, and other key mitigation sectors.

1 Introduction

In 1992, developed states agreed to ‘take the lead in combating climate change’.1 This was followed in 1995 by quantified emission-limitation and reduction commitments in the Kyoto Protocol. With the United States out of the Kyoto Protocol, the European Union assumed the global leadership on climate change mitigation. The European Union’s tools to limit and reduce greenhouse gas emissions were multiple and diverse, but the flagship measure was the eu ets.2 Developing states were progressively ‘socialized’ into a market-based approach to international mitigation action, in particular through the Clean Development Mechanism.3 China has hosted by far the largest number of cdm projects.4 Most of them were funded from sources in the European Union.5

In 2005, China surpassed the United States as the world’s largest greenhouse gas emitter.6 It now accounts for more than a quarter of global greenhouse gas emissions.7 In the period between the 2009 Copenhagen Accord and the 2015 Paris Agreement, China agreed to ever more ambitious steps on mitigation. This culminated in China’s Intended Nationally Determined Contribution in the months prior to the Paris Agreement, in which the country committed ‘To achieve the peaking of carbon dioxide emissions around 2030 and making best efforts to peak early’.8 This commitment will require a mitigation effort of unprecedented pace and scale.9 An array of new or enhanced measures will most likely be implemented.

China’s climate change laws and policies, present and future, may be assumed to be influenced to some extent by those of Western, and in particular, European nations. The soft power of academic research, reporting by think tanks, and advice by international organizations and even by China’s own increasingly foreign-educated elites, are conducive to that effect. China’s government is also open to replicating instruments that have been developed elsewhere without having to innovate. The unfccc called on developed states to take mitigation measures first, but also to take the lead,10 an expression which may be taken to imply that mitigation tools first developed in the West would later be extended to the Rest. European governments and Western think tanks have not been timid in promoting market-based mechanisms as the tool to reduce greenhouse gas emissions in China.11 China’s decision to establish an ets was in order to ‘make the market play the decisive role in resource allocation’.12 This was despite the findings of legal,13 policy,14 and economics15 scholars, who emphasized the difficulties that market-based mechanisms would face in China’s unique political and economic circumstances, which are characterized by the presence of State-Owned Enterprises with little appetite for market-based incentives intruding into their key sectors.16

Whether or not China’s market-based mechanism will be a useful tool in climate change mitigation, it will surely not be a sufficient one. Other laws and policies will need to be implemented as well, if only to address what does not fall within the scope of a market-based mechanism.17 The transplantation and adaptation of tools developed in the European Union and other Annex i parties could help China, but innovation in law and policy is likely to play at least as significant a role. These innovations are likely to be particular to China’s circumstances as a socialist market economy. They must address endemic issues having to do with enforcement, corruption, and guanxi (informal networks of personal influence), as well as, of course, straightforwardly economic ones. China’s Thirteenth Five-Year Plan, adopted in 2016, mentions ‘effective control’ over key economic sectors as the first of a list of measures to mitigate climate change.18

This article looks at one aspect of China’s emerging mitigation toolkit by focusing on the potential role of soes. An soe is a company controlled by the state through equity ownership or other means.19 In China, soes (国有企业) are firmly embedded in the ‘political, economic, and social matrix’ of state capitalism and exert a ‘tremendous influence’ in the country’s political economy.20 Of course, they are not unique to China. Many states maintain a strong share of ownership in key economic sectors, such as fossil-fuel extraction, power generation, and transportation.21 In Western countries, however, soes are generally kept at arm’s length from the government, to ensure a level playing field between soes and private companies,22 thus significantly reducing a government’s ability to use soes as tools for a public-policy objective, such as climate change mitigation. By contrast, in the Chinese context, a high degree of formal and informal interaction between government authorities and soes makes them an obvious mitigation tool. This point has generally been overlooked in the literature.23

Our attempt to explore the role of soes in climate change mitigation in China faces many difficulties. Foremost among them is the lack of transparency and openness of Chinese institutions in general, but even more so soes. Even in Western countries with well-functioning legal systems, soes are often able to negotiate both the content of the law imposed on them and how it is implemented. Such two-way influence is considerably more pervasive in China, where what belongs to the individual, the enterprise, the state, or the Communist Party is not always clearly delineated, and where legal provisions are often bypassed by policies, informal understandings, or interpersonal connections.24

The next section provides a general background on state ownership in the context of a socialist market economy. Section 3 highlights efforts made by supervisory institutions in China to encourage soes to reduce their greenhouse gas emissions. Section 4 documents soe-related mitigation trends in the greenhouse-gas-intensive sectors of China’s economy.

2 Background: State Ownership in the Context of Socialism with Chinese Characteristics

China’s shift to a socialist market economy, initiated in 1978, has led to a considerable development of private enterprise.25 Yet, it is not an accident that the Constitutional provision on ‘public ownership of the means of production’26 has remained in place. China’s government has sought to keep a tight control of the economy.27 Following the enactment of the 1988 Law on Industrial Enterprises Owned by the Whole People,28 and, above all, the 1993 Company Law,29 many of the economic units (单位) belonging to the state or to collectives were formally transformed into limited-liability corporations. However, their privatization was carried out slowly and cautiously.

In 1996, as part of the Ninth Five-Year Plan, the government adopted a policy of ‘grasping the big while letting go of the small’ (抓大放小).30 Accordingly, many small soes were sold off to the private sector, while the state maintained ownership in economic sectors of strategic importance. These comprised ‘national security-related industries, natural monopolies, sectors providing important goods and services to the public, and important enterprises in pillar industries and the high-technology sector’.31 In 2009, the government responded to the global financial crisis with a huge investment, channeled mostly through the public, soe-dominated, sector.32 soes are also an integral component of the ‘Going Out’ (走出去) strategy, by which China’s government encourages its enterprises to invest abroad.33

In the wake of the Ninth Five-Year Plan, state ownership in sectors of strategic importance was frequently reorganized into a complex net of state-owned holding enterprises intermediating between the state and the companies themselves. For instance, in 1988, China National Petroleum Corporation (cnpc) was created through the corporatization of an entire administration in charge of petroleum exploration and mining. cnpc is now an integrated multinational company with numerous subsidiaries (PetroChina being the best known) specializing in certain activities and geographical sectors in China and abroad.34 Other such large groups with listed subsidiaries throughout the world include China Power Investment Group, a leader in power generation, and State Grid Corporation of China, whose ownership and management of electrical grids is not limited to China. soes are usually nested in complex corporate groups and interlinked in networks of cross-ownership and personnel movement.35 It is not always clear how soes are supervised by the state, especially when they are owned by intermediary holding companies.

Although often mentioned in policy documents, soes do not have any special legal status under Chinese law. The 2003 Company Law, as revised in 2013, contains special provisions on ‘Wholly State-Owned Companies’ (国有独资剬司), defined as limited-liability corporations that are entirely and directly owned by the state (whether the central, provincial, municipal, or county government).36 A characteristic of Wholly State-Owned Companies is the right of elected employee representatives to join the board of directors.37 soes (whether fully or partly state-owned) that are directly controlled by the central government are called ‘Central Enterprises’ (中央企业), whereas those directly controlled by a provincial, municipal, or county government are called ‘Local Enterprises’ (地方企业).38 The relationship between these various concepts is summarized in Table 1.

tab1

About a hundred Central Enterprises, most of which are fully state-owned, control key economic sectors, often in monopolistic or oligopolistic situations.39 By contrast, Local Enterprises are usually of a modest size, only partly state-owned, and face competition (including from other Local Enterprises).

The State Council’s State-Owned Assets Supervision and Administration Commission (国务院国有资产委员会) was created in 2003 to supervise Central Enterprises and, through its local branches, Local Enterprises.40 A ministry-level agency in the government’s organizational chart, sasac is a key actor in the world of China’s soes. While it acts as a controlling shareholder over Central Enterprises and exerts control over key soe assets and cash flows, sasac also has other functions.41 For example, it facilitates intra- and inter-organizational movements of top soe managers.42 sasac has emerged as the official link between China’s government and soes.

Despite the transformation of these government units into corporations under the supervision of sasac, authority and control, or at least influence, over Central Enterprises continues to be exercised by other government agencies, officials, and the Communist Party (cpc).43 To ensure preferential treatment, soe managers must constantly develop and maintain interpersonal relations (guanxi) with government and party officials, on which the latter may also rely to advance their own objectives.44 In addition to this relational system, soe managers—like other public officials—are strongly expected to be members of the cpc and to attend regular lectures on neo-Marxist ideology. Political loyalty and correctness play key roles in soe managers’ career paths, effectively aligning the management of soes with the ideology of the cpc.45 Thus, executive-level ‘political integration diverges from the principle of separating soes from the government that many Chinese corporate governance reform laws have purportedly declared’.46 sasac, soes, and soe managers operate in the shadow of Party control.47

In opinion columns and articles published in People’s Daily—the cpc’s official newspaper—soes are commonly described as institutions which ‘fiercely promote national modernization and promote the interests of the people’,48 and, by pioneering technological innovation, are ‘a powerful driver of sustainable development’.49 Such expressions of the fact that soes must serve the Party may be expected to have an influence on the actual conduct of soes. Many articles in People’s Daily further contend, in typical revolutionary prose, that ‘following the ccp’s leadership and strengthening the Party’s authority is a glorious tradition and unique role of soes—their “root” and their “soul”’.50 In his vision of socialism with Chinese characteristics, Xi Jinping, cpc General Secretary and President of the People’s Republic, has time and again affirmed a vision of soes as a lever of Party rule.51 In the context of ongoing debates about the need to reduce or retool state ownership to counter slowing economic growth,52 soes are under pressure to justify their utility by making significant contributions to the implementation of the government’s policies.53

State-ownership policies are thus clearly motivated by objectives beyond profit or growth maximization.54 China has maintained substantial ownership in soes in order to pursue diverse public-policy objectives, ranging from supporting urban employment to controlling sensitive industries.55 The 1988 Law on Industrial Enterprises Owned by the Whole People provided that such enterprises must pursue safe production systems, improve working conditions, protect labor and the environment, and thus realize the goals of a ‘safe’ and ‘civilized production’.56

The objectives that different interest groups expect soes to fulfill are inevitably conflicting.57 Interpersonal relationships can lead to public support for enterprises that fulfill no tangible public interest. Profit maximization or other considerations have occasionally led soes, in particular Local Enterprises, to cause serious environmental damage.58 The privileged position of large soes can be used to hinder law enforcement and influence forthcoming legislation and bureaucratic targets.59 However, these tendencies have more to do with the definition of priorities by central or local authorities than with any inherent contradiction between state ownership and, in particular, environmental protection.60 As China rapidly develops, and as environmental concerns steadily grow, environmental concerns have become prominent in the list of priorities imposed on soes.61

It is noteworthy that soes tend to be concentrated in economic sectors highly relevant to climate change mitigation, such as fossil-fuel extraction, thermal power generation, the metals industry, and transportation. There is a strategic interest in controlling these sectors of the carbon-based economy. For China, they are of central importance to promoting a particular vision of economic development.62 At the same time, the prevalence of state ownership in these sectors gives China’s government a tool with which to implement climate change mitigation by pressuring some of the most instrumental actors of the carbon-based economy to turn to more sustainable operations through incremental efforts to promote energy efficiency in the production process or through radical departures from their lines of business, such as a shift to renewable energy. In heavily consolidated sectors such as oil-and-gas production or power generation, reform by just a few large soes could go a long way toward developing and deploying new technologies to trigger a transition to renewable energy, amongst other sustainable outcomes. As Bergsager and Korppoo have suggested, several policies on climate change mitigation launched by China’s government have relied on soes for the implementation stage.63 Thus soes emerge as potential proxies for innovative climate policies in China, which go beyond the mere transplantation of policies developed in other parts of the world.

3 Mitigation Concerns in the Supervision of soes

The relevance of Chinese soes to environmental protection was emphasized already in a speech given in 2007 by Li Rongrong, sasac’s then director. Li argued that Central Enterprises, as instruments for furthering the interests of the people, should play ‘an exemplary role in energy conservation and emission reduction’.64 He noted the prevalence of Central Enterprises in economic sectors relevant to environmental protection, as well as their instrumental role in energy conservation and emission reduction. He itemized the ‘obvious advantages’ of Central Enterprises in this respect: their technological innovations, skilled personnel, and advanced equipment and management systems. Contending that Central Enterprises ‘are not only ordinary enterprises, but are also engaged to support a rapid national economic development’,65 sasac’s director took an unequivocal position in favour of top-down implementation of energy-saving and emission-reduction measures through Central Enterprises.

In a Guidance Note on the Implementation of Social Responsibility of the Central Enterprises, issued in December 2007, sasac affirmed a long list of duties binding Central Enterprises to the edification of socialism with Chinese characteristics, including through the promotion of sustainable development. This administrative directive states that Central Enterprises should ‘strengthen resource conservation and environmental protection’ by ‘conscientiously implementing their responsibility’ and ‘taking the lead in saving energy and reducing emissions’; they should also promote a ‘low emissions and high efficiency development path’.66

Three years later, in 2010, sasac issued a set of Interim Measures for the Supervision and Administration of Energy Saving and Emission Reduction in Central Enterprises.67 Through these Measures, sasac, as an organ of the State Council, imposed obligations on all Central Enterprises to formulate specific plans,68 determine internal responsibilities,69 introduce environment- and energy-related considerations in the managerial reward system,70 and develop training programs for energy conservation and emission reduction,71 among other measures.

Although the Measures’ focus is on local air pollution, their attempt to reduce energy consumption appears to be a deliberate step to also limit greenhouse gas emissions. Thus, they require all Central Enterprises to ‘closely integrate energy conservation and emission reduction with enterprise development strategies and structural readjustments’, including through optimizing industrial structures and production processes and eliminating inefficient or highly polluting technologies and processes with high energy consumption.72 Under the instrument, Central Enterprises are directed to ‘promote the development and utilization of renewable energy’,73 while also contributing to associated research and development.74 They are to develop and improve monitoring and reporting systems to measure energy use and emission levels75 and submit an annual (or more frequent) summary report to sasac.76

The 2010 Measures classified all Central Enterprises into three categories, comprising 32 ‘key’ Central Enterprises responsible for substantial levels of pollution, 51 others ‘of concern’, and 45 falling into a ‘general’ category (expanded in Table 2).77 ‘Key’ Central Enterprises and those ‘of concern’ were assigned additional obligations, including having to report to sasac on a quarterly and biannual basis, respectively.78

tab2

In addition, the 2010 Measures declared that energy saving and emission reduction would become part of the performance-evaluation system of Central Enterprises.79 Each Central Enterprise was to accordingly define ‘reasonable targets’ of energy conservation and emission reduction based on scientific criteria, taking into account relevant national policies, the characteristics of the sector, and the feasibility of energy conservation and emission reduction.80 These targets were to be reviewed and adopted by sasac, which was also to assess their implementation.81

The performance evaluation of Central Enterprises incorporates career incentives designed to encourage enterprise managers to implement relevant measures.82 A system of awards commends ‘Excellent Enterprises for Energy Conservation and Emission Reduction’.83 In 2011, a sasac decision bestowed this award on no fewer than 32 Central Enterprises, including 18 ‘key’ Central Enterprises.84 (cnpc ranked first.) The decision reiterated the role of Central Enterprises in ‘advancing, in an exemplary fashion, pioneering steps and innovations to overcome challenges in enhancing energy efficiency’.85 There is anecdotal information on another set of awards bestowed in 2016,86 but, as of May 2017, sasac had yet to publish a corresponding decision.

sasac has taken a series of steps to complement the 2010 Measures. For instance, it claims to have allocated cny200 billion (approximately us$30 billion) of state-owned capital between 2011 and 2014 to support energy conservation and emission reduction through Central Enterprises.87 (We have not been able to obtain more detailed information on what this figure includes.) In November 2013, sasac organized a conference on the role of Central Enterprises in energy saving and emission reduction, with the purpose of raising awareness and sharing good practices.88 A committee of experts on energy saving and emission reduction by Central Enterprises was established at the meeting, and 69 experts were appointed to it. As a third example, in 2016, energy-saving and emission-reduction achievements were integrated into a revised and systematic approach to career incentives.89

These initiatives were not isolated events. The mobilization of Central Enterprises for environmental protection was not only approved but also encouraged by the State Council. The Council has constantly promoted the role of sasac in supervising and assessing soe efforts toward energy saving and emission reduction, for instance through the Comprehensive Working Plans on Energy Conservation and Emission Reduction that it issued in connection with the implementation of the Twelfth Five-Year Plan in 2011 and the Thirteenth Five-Year Plan in 2016.90 These instruments endorse sasac’s initiative to include energy-saving and emission-reduction objectives in the performance assessment of Central Enterprises and their managers.91

The role of soes in the attainment of environmental objectives has also been promoted by the National Development and Reform Commission. In a 2011 action plan to encourage environmental protection by corporations, the ndrc emphasized the responsibility of soe managers in Central as well as Local Enterprises.92 When updating this document in 2014, the ndrc stated that Central Enterprises should play an ‘exemplary role’ in meeting energy-saving and emission-reduction objectives, and indeed that all soes ‘should strive to complete the energy-saving objectives of the Twelfth Five-Year Plan ahead of schedule’.93 The following year, the ndrc reported that nearly half of the Central Enterprises and their units (i.e. their subsidiaries, etc.) had managed to reduce energy consumption beyond their objective—compared with only 31 per cent of all public and private enterprises.94 At a press conference in January 2017, officers of the ndrc and Ministry of Environmental Protection reiterated the importance of the accountability of soes and their management to the achievement of the Thirteenth Five-Year Plan’s energy-conservation and emission-reduction objectives.95

While policies and targets set by sasac are not always implemented or met,96 it is clear that environmental and climate change concerns have progressively been upgraded in the overall hierarchy of soes’ objectives. Energy saving, emission mitigation, and other green policies have penetrated deeper into the regulatory labyrinth of China’s state capitalism.97 This interaction between political and regulatory bodies, sasac, and soes, lays the ground for an innovative endogenous policy on climate change mitigation.

4 Specific Sectoral Trends

The general regulatory and supervisory framework described in the previous section is complemented by sectoral policies and their implementation by some of the largest and most influential Chinese soes. The importance of decisions made by colossal soes in key sectors cannot be overemphasized. Just a handful of soes control most of the exploration, extraction, refining, and distribution of oil, gas, and coal. They also dominate power generation, metals, cement, construction, and transportation. Some of them—especially Central Enterprises—have taken important environmental initiatives in recent years and are likely to become increasingly engaged in efforts towards climate change mitigation.

4.1 Fossil Fuels

soes dominate the oil, gas, and coal industries not only in China but the world over. Victor et al. attribute 61 per cent of global oil production and 52 per cent of global gas production to soes,98 while the International Energy Agency estimates that 66 per cent of coal production in non-oecd countries is controlled by soes.99 However, China’s soes stand out for having a much higher share of state ownership in this sector. China’s government considers oil and gas to be a strategic sector to be kept under its absolute control,100 while the largest actors in the coal sector are either Central or Local (provincial) Enterprises.

By and large, fossil fuels in China have remained the preserve of soes. Oil and gas are managed by an a few giant central holding enterprises,101 notably cnpc (owner of PetroChina), China Petroleum and Chemical Corporation (cpcc, owner of Sinopec), and China National Offshore Oil Corporation (cnooc).

The coal sector is not as consolidated.102 Coal production is split among Central Enterprises (such as China Shenhua and China Coal Energy Company), Local Enterprises (such as Shaanxi Coal and Chemical Industry Group, controlled by the province of Shaanxi, and Yankuang Group, controlled by the province of Shandong), and even some private companies.

In 2010, fossil fuels produced by PetroChina alone resulted in the emission of 614 Mt CO 2 eq.,103 more than the total greenhouse gas emissions of a middle-sized developed country such as Australia or the United Kingdom; it represents around 6 per cent of China’s total greenhouse gas emissions in 2010.104 A rough calculation suggests that the emissions from the combustion of the coal produced by China Shenhua in 2016 are even higher.105 Aggregating the operations of all Chinese soes in the coal and cement sectors, Heede estimated that their products and operations emitted 7,898 Mt CO 2 eq. in 2010, or about 80 per cent of China’s emissions that year, and more than the total emissions from the United States.106

Efforts have been made by soes, in particular Central Enterprises, to reduce their greenhouse gas emissions. They have tried to do so through research and development, deployment of innovate technologies, and operational reduction of greenhouse gas emissions. The ndrc has added its support to joint efforts by cpcc and PetroChina, as well as to efforts by the coal giant China Shenhua, to launch a large-scale, integrated pilot project on carbon capture, utilization, and storage (ccs).107 Pursuant to sasac’s 2010 Measures,108 these and other companies have been attempting to account for their greenhouse gas emissions, improve operational efficiency, and innovate in technology. Going beyond their obligations under domestic law, cpcc and cnooc joined the un Global Compact’s ‘Caring for Climate’ initiative, whereby they committed to ‘becoming … active business champion[s] for rapid and extensive climate action’,109 and to publicly communicate their progress on implementation annually.

To document the action of hundreds of Central and Local Enterprises would go beyond the scope of this article. Instead, we have selected one example of a major Central Enterprise: cpcc (Sinopec’s owner). cpcc recognizes that its role is different from that of a private enterprise. In 2009, the group adopted as its funding principle the mission of ‘developing the enterprise, contributing to the country, rewarding shareholders, returning to the society, benefiting employees’.110 In public statements, the chairman of the board of directors, Wang Yupu, has reiterated that Sinopec should develop a low-carbon and energy-saving production model.111

The group highlighted several key projects in its reports to the Caring for Climate initiative. In 2012, Sinopec began exploiting the world’s largest shale gas field outside the United States. It is located in Fuling, Chongqing Province. By 2015, this field accounted for two-thirds of China’s shale-gas extraction. Sinopec portrays its initiative as a cleaner alternative to coal.112 Since 2009, the company has also been investing in research on biofuel for aircraft. In 2015, its bio-jetfuel was used in a commercial flight from Shanghai to Beijing.113 To reach out to other Chinese enterprises, in 2013 the company launched the ‘Initiative of China’s Business Community on Caring for Climate’, pursuant to which it has organized an annual advocacy workshop.114

Such efforts may of course be dismissed as window-dressing by a giant oil-and-gas producer whose core interest is in direct conflict with the shift to a green economy.115 The company’s mission of ‘Fueling a Better Life’116 may indicate the internal tension—although perhaps not as serious a contradiction as in the case of Shaanxi Coal and Chemical Industry Group, whose motto is to promote ‘A carbon intensive industry with a low-carbon and green model.’117

Incremental improvements through energy saving or through a turn to more efficient operations may nevertheless significantly contribute to climate change mitigation in the short-to-medium term. In the long term, meaningful options raise difficult questions. A radical strategic shift would be required for oil-and-gas soes to refocus their operations on biofuel production, geothermal energy, or ccs.

4.2 Power Generation

Power generation is the largest source of greenhouse gas emissions in the world, responsible for more than a third of current emissions.118 The iea estimates that ‘nearly half of the world’s power generation assets’ are owned by state enterprises.119 State ownership in the power sector is more prevalent in emerging economies than in the European Union (45 per cent) or the United States (20 per cent).120 In China, most thermal, nuclear, and hydroelectric power-generation infrastructure belongs to Central Enterprises, whereas private firms are entering the sector through investments in renewable energy.

China’s State Power Corporation, which used to control the production and distribution of electricity in the country, was dismantled in 2002. The management of the national grid was entrusted to two new Central Enterprises, the State Grid Corporation and China Southern Power Grid. Power-generation operations were distributed among five new Central Enterprises: China Datang, China Huadian Corporation, China Huaneng Group, State Power Investment Corporation, and China Guodian Corporation. In a 2013 document on the implementation of the Twelfth Five-Year Plan in the energy sector, the State Council reiterated its adherence to ‘the dominant position of State ownership in essential energy sectors which are closely linked to national security and economic development’.121

This central control accords great importance to the priorities formulated by the State Council and implemented through sasac. Under the Thirteenth Five-Year Plan, emphasis is placed on ‘reducing and eliminating over-production in the coal power sector’122 through ‘strictly controlling the assessment and permission of starting new coal production projects’.123 The Thirteenth Five-Year Plan also calls for investment in renewable energy and a grid to support it,124 as well as in the large-scale deployment of so-called ‘green coal industries’ through ‘clean and highly efficient coal-fired power’.125

Even as Central Enterprises are under sasac’s supervision, they have proven to be particularly difficult to control in the power sector, given their significant economic and political power. Thus, for a long time, national authorities failed to curb the construction of coal-fired plants, which led to a power-generation capacity exceeding demand.126 It was not until April 2016 that the ndrc announced its intention to ‘promote the orderly development of China’s coal-fired power’,127 and another eight months would pass before 85 coal-plant projects were suspended.128

Under the 2009 amendment to the Law on Renewable Energy, wind, solar, hydroelectric, and other forms of clean energy are to be encouraged through subsidies and the imposition of a quota of support for renewable energy by grid companies.129 None of the law’s provisions mentions soe responsibilities, while private investment is strongly encouraged. Yet, between 2002 and 2007, all five major Central power-generation Enterprises acquired or created subsidiary companies specializing in renewable energy.130

Growth in renewable energy has been facilitated by the two grid companies. Most energy consumption in China occurs in the eastern and southern provinces, where China’s population is concentrated, and where development has been driven by international trade. However, hydroelectric, solar, and wind energy are more readily exploited in the less densely inhabited areas of the country in the north and west. The distance between the potential production and consumption areas of renewable energy make it virtually impossible to develop a reliance on it without significant further investment in the national grid. This was recognized in the 2009 Law on Renewable Energy, which required ‘power grid enterprises’—i.e. the two aforementioned soes—to ‘strengthen the construction of power grids, expand the scope of renewable energy power distribution, develop and apply smart grid, energy storage and other technologies, improve the operation and management of power grids, improve the ability to absorb renewable energy and provide Internet services for renewable energy’.131 New technologies were developed by the two grid companies for Ultra High Voltage lines, as one of the elements of a smart grid able to convey electric power over great distances.132

Overall, China’s power-sector soes have been ambivalent in their support for climate change mitigation. The five power-generating Central Enterprises certainly exercise a strong lobbying pressure that has hindered the development of renewable energy. Reports suggest that pressure was exercised on grid companies to buy coal-generated electricity rather than available wind power, as well as on local governments not to implement the subsidies made available under the 2009 Law on Renewable Energy.133 The present overcapacity in coal-based electricity generation is a consequence of the power these Central Enterprises exercise over public authorities.134 On the other hand, such interests have not been able to stop a massive deployment of renewable energy. Of great importance is that each of the five groups is developing its economic interest in renewable energy and could become increasingly committed to national policies in support of such alternatives.

4.3 Other Sectors With Mitigation Potential

The economic leadership of soes in China’s shift to a green economy is not limited to the fossil-fuel and power sectors. soes contribute to advancing China’s objectives on climate change mitigation through initiatives in such sectors as the metals industry, construction, transportation, and manufacturing. While a comprehensive study of the role of soes in these sectors goes beyond the scope of this article, some key developments are worth mentioning.

The steel and aluminium industries have made a significant contribution to China’s economic growth.135 Given their strategic importance, they are still dominated by a few large Central Enterprises, such as Ansteel, Baosteel, Wuhan Steel, and the Aluminum Corporation of China. Steel and aluminium production are energy-intensive sectors.136 Efforts to increase their energy efficiency have economic as well as environmental motives. A 2016 State Council decision on the implementation of the Thirteenth Five-Year Plan in the iron-and-steel industry highlights the importance of reducing energy consumption and the emission of pollutants in the sector.137 Emphasis is put on large enterprises—most of them Central Enterprises—and their ability to innovate in technology and reach more stringent standards of efficiency. Similar provisions are part of a State Council decision on the implementation of the Thirteenth Five-Year Plan in the non-ferrous metals industry.138

The transport sector is also dominated by soes, with all major domestic airlines and all train operations controlled by Central Enterprises. As elsewhere in the world, national decisions on infrastructure development have been instrumental to the development of particular modes of transportation in China. Thus the development of a high-speed railway network in China contributed to diverting an increasing inter-city transportation need away from aviation.139 soes in this sector have been tasked to achieve energy efficiency and emission reductions. The decision of the State Council on the implementation of the Thirteenth Five-Year Plan in energy conservation and emission reduction emphasizes that airlines must take appropriate measures, such using auxiliary power units or availing themselves of new sources of energy.140 The 2012 Opinion of the State Council on Promoting the Development of Civil Aviation refers to the responsibility of civil-aviation authorities to monitor aviation soes, including in relation to their contribution to building a ‘green low-carbon aviation’.141

5 Conclusion

In order to limit or reduce greenhouse gas emissions, each state adopts its own unique strategy, largely influenced by its economic, political and even cultural circumstances. This article has argued that China’s strategy has come to rely in a significant part on soe conduct. Important initiatives have been undertaken by about two or three dozen giant Chinese Central Enterprises in the key emission sectors of fossil fuels, power, metals, and transportation. These initiatives are rarely the direct result of legal or regulatory provisions laying down rights and obligations; rather, they originate in vague administrative provisions implemented through political tools, company supervision, personnel rotation, and other modes of informal influence. Due to a lack of transparency and documentation, the role of Chinese soes is often ignored, with most foreign and even domestic commentators focusing instead on the much more visible development of a market-based mitigation mechanism. This may reflect a concern about China’s state capitalism and its potentially distortive effects.142 Just as China’s ‘national champions’ are often viewed as threats to a level playing field within international trade-and-investment regimes,143 soes are easily portrayed as the chief culprits behind rampant pollution and environmental damage.144

This article has taken a different approach. Instead of viewing soes as fundamentally irredeemable due to their inefficient governance structures, rent-seeking abilities, and strong bargaining power,145 we have suggested that they could also serve as proxies for climate change mitigation, as this policy objective moves up the agenda of China’s government. Giant soes in key economic sectors play an instrumental role in developing and deploying new technologies, benefiting from economies of scale which few private companies can achieve, and allowing China’s government to lead by example. In the short-to-medium term, soes provide China’s government with an important, complementary climate-policy entry point. sasac’s role is crucial. As a supervisory agency, sasac stands at a critical juncture, aligning soe action with the priorities set by the cpc and pursued by China’s government—priorities that now include a transition to a green economy.

There is a darker side to this story. soes with vested interests in the fossil-fuel economy may seek to hinder mitigation policies. In a large country with persistent enforcement difficulties, this can be done not only through open political lobbying or discrete support for disinformation campaigns, but also through pressure on local officials not to implement national policies. In this context, China’s government has understood that there is a need to diversify the operation of key Central Enterprises, e.g. through investment in renewable energy, in order to transform them into sectoral leaders in the shift to a greener economy. Altering the vested interests of powerful fossil-fuel soes is a necessarily preliminary step toward further mitigation action.

Lastly, we are aware that this article is only a preliminary mapping exercise in a complex field of research. It gives an overview of trends in regulation and informal influence that the national and local governments use to guide or constrain the conduct of soes. This phenomenon cannot be fully described through desk-based research. To take the full measure of Chinese soes’ contribution to climate change mitigation—the steps already taken, those which might still be taken, and the opportunities and challenges along the way—would require a multidisciplinary research effort, including experts in economics, socio-legal studies, political science, and perhaps even anthropology. While this article raises more questions than it answers, we hope that it sheds some light on an important aspect of China’s strategy on climate change mitigation—and that it thus whets the appetite for further research.

1

unfccc, art. 3(1). We wish to express our thanks to ZHANG Hao, HE Xiangbai, YIN Ying, Alexander Zahar, and two anonymous reviewers for insightful comments on earlier versions of this article. All remaining errors are our sole responsibility. All translations from the Chinese are by the authors except if stated otherwise.

2

Directive 2003/87/ec of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community, oj L 275, 25.10.2003, pp. 32–46.

3

See Kyoto Protocol, art. 12.

4

See, unfccc, Clean Development Mechanism Executive Board Annual Report 2014, <http://unfccc.int/resource/docs/publications/unfccc_cdm-eb_annual_report2014.pdf>. The share of cdm projects registered by China was more than 49% as of 2014.

5

See, e.g., lin Han, ‘The contribution of the Clean Development Mechanism (cdm) towards China’s Climate Change Mitigation and Sustainable Development’, in Curtis Andressen (ed.), China’s Changing Economy: Trends, Impacts and the Future (London: Routledge, 2016), 158.

6

See World Resources Institute, cait Climate Data Explorer, ‘Total ghg Emissions Including Land-Use Change and Forestry’, <http://cait.wri.org/>.

7

On greenhouse gas emissions attributed to each country, see the cait Climate Data Explorer developed by the World Resources Institute and <http://cait.wri.org>.

8

Enhanced Actions on Climate Change: China’s Intended Nationally Determined Contributions, 30 June 2015, <www4.unfccc.int/submissions/INDC/Published%20Documents/China/1/­China’s%20INDC%20-%20on%2030%20June%202015.pdf>, at 5.

9

Thus, the World Resources Institute notes that China’s commitment to 20% of ­non-fossil-fuel energy by 2030 will require the deployment of non-fossil-fuel sources of energy roughly equivalent to the United States’ total current electricity capacity; see Taryn Fransen et al., ‘A Closer Look at China’s New Climate Plan (indc)’ World Resources Institute, 2 July 2015, <www.wri.org/blog/2015/07/closer-look-chinas-new-climate-plan-indc>.

10

unfccc, art. 3(1).

11

See, e.g., Olivia Gippner, ‘Emissions trading and climate diplomacy between Europe and China’ (Norwegian Institute of International Affairs, Policy Brief No. 32, 2016), at 3, noting for instance that ‘The European Commission’s dg Climate Action even has a specific office dedicated to emissions trading in China.’

12

China’s indc, supra note 8, at 14 (paragraph L). See also National Development and Reform Commission (ndrc), ‘Interim Measures for the Administration of Carbon Emission Permit Trading’ (碳排放权交易管理暂行办法), 10 December 2014, <http://qhs.ndrc.gov.cn/zcfg/201412/t20141212_652007.html>, at Chapter 1, Section 1; and, more recently, State Council, Working Plan on the Control of Greenhouse Gas Emissions during 13th Five Year Plan (“十三五”控制温室气体排放工作方案), 27 October 2016, <www.gov.cn/zhengce/content/2016-11/04/content_5128619.htm>, Chapter 6.

13

See Anatole Boute, ‘The Impossible Transplant of the eu Emissions Trading Scheme: The Challenge of Energy Market Regulation,’ 6(1) Transnational Environmental Law 59 (2017).

14

See Alex Y. Lo, ‘Challenges to the development of carbon markets in China’, 16(1) Climate Policy 109 (2016).

15

See ZHAO Xin-Gang et al., ‘How to Improve the Market Efficiency of Carbon Trading: A Perspective of China’, 59 Renewable and Sustainable Energy Reviews 1229 (2016).

16

See YU Xiang and Alex Y. Lo, ‘Carbon Finance and the Carbon Market in China’, 5(1) Nature Climate Change 15 (2015), at 16, noting that Chinese soes ‘concentrate on complying with regulatory requirements and have … low interest in trading emission credits as a form of financial investment.’

17

See, e.g., MO Jianlei et al., ‘The impact of Chinese carbon emission trading scheme (ets) on low carbon energy (lce) investment,’ 89 Energy Policy 271 (2016), noting that ‘other policy measures will be needed to promote low-carbon energy development in China.’ For an overview of the climate action that China intends to implement in the coming years, see Working Plan on the Control of Greenhouse Gas Emissions during 13th Five Year Plan, supra note 12; and China’s indc, supra note 8.

18

State Council, 13th Five-Year Plan for the National Economic and Social Development of the People’s Republic of China (国民经济和社会发展第十三个五年规划纲要), 17 March 2016, Chapter 46, Section 1, first sentence. See also 12th Five-Year Plan for the National Economic and Social Development of the People’s Republic of China (国民经济和社会发展第十二个五年规划纲要), 16 March 2011, Chapter 21, Section 1, first sentence, calling for ‘structural adjustments’ in industrial, energy and other key systems.

19

There is no universally agreed definition of an soe. Instead, many conflicting national and international criteria coexist. As an example, the United Nations Conference on Trade and Development defines soes as companies where the State has ‘a stake of 10 per cent or more of the voting power,’ whereas the oecd opts for a stricter standard in its conception of ‘control of the state’ meaning ‘the state being the ultimate beneficiary owner of the majority of voting shares or otherwise exercising an equivalent degree of control’. See unctad, World Investment Report 2011, <www.unctaddocs.org/files/UNCTAD-WIR2011-Full-en.pdf>, at 28; and oecd, Guidelines on Corporate Governance of State-Owned ­Enterprises (2015 Edition), <www.oecd.org/daf/ca/OECD-Guidelines-­Corporate-Governance-SOEs-2015.pdf>, at 15–16. Due to soes’ central role in Chinese economy, definitions that rely solely on equity ownership are often misleading. See Curtis J. Milhaupt and Wentong Zheng, ‘Beyond Ownership: State Capitalism and the Chinese Firm’, 103 Georgetown Law Journal 665 (2015).

20

FENG Deng, ‘Indigenous Evolution of soe Regulation’, in Benjamin L. Liebman and Curtis J. Milhaupt (eds.), Regulating the Visible Hand? The Institutional Implications of Chinese State Capitalism (Oxford: Oxford University Press, 2016), 3 at 4.

21

In the eu, soes accounted for roughly 40% of the share in total energy turnover and close to 88% in the railway sector between 2008–2012: European Commission, ‘State-Owned Enterprises in the eu: Lessons Learnt and Ways Forward in a Post-Crisis Context (July 2016)’ (European Commission Institutional Paper 031, 2016), at 8–9. For a recent review of global trends, see William L. Megginson, ‘Privatization, State Capitalism, and State Ownership of Business in the 21st Century’, Foundations and Trends in Finance (forthcoming), <http://ssrn.com/abstract=2846784>.

22

This in exemplified in various best practices on soe governance. See e.g. oecd, supra note 19, at 20–23, and World Bank, Corporate Governance of State-Owned Enterprises: A Toolkit, at 25–64. Moreover, numerous national, regional, and international legal frameworks regulate the relationship between states and their soes. See, e.g., Benjamin A. Templin, ‘The Government Shareholder: Regulating Public Ownership of Private Enterprise’, 62 Administrative Law Review 1127 (2010).

23

For a notable exception, see Alex L. Wang, ‘Chinese State Capitalism and the Environment’, in Benjamin L. Liebman and Curtis J. Milhaupt (eds.), Regulating the Visible Hand? The Institutional Implications of Chinese State Capitalism (Oxford: Oxford University Press, 2016), 251. Moreover, state ownership is increasingly realized as an important policy entry-point in the context of climate activism by sovereign wealth funds; see, e.g., Danyel Reiche, ‘Sovereign Wealth Funds as a New Instrument of Climate Protection Policy? A Case Study of Norway as a Pioneer of Ethical Guidelines for Investment Policy’, 35 Energy 3569 (2010); Norges Bank Investment Management, ‘Climate Change Strategy: ­Expectations of Companies 2015’, <www.nbim.no/contentassets/27ce1a7cbf0b4bba9d4d94bd23165e46/climate-change-strategy-document.pdf>.

24

See Lei Zheng, Curtis J. Milhaupt, and Benjamin L. Liebman, ‘soes and State Governance: How State-Owned Enterprises Influence China’s Legal System’, in Benjamin L. Liebman and Curtis J. Milhaupt Curtis (eds.), Regulating the Visible Hand? The Institutional Implications of Chinese State Capitalism (Oxford: Oxford University Press, 2016).

25

See, e.g., WANG Jiangyu, Company Law in China Regulation of Business Organizations in a Socialist Market Economy: Regulation of Business Organizations in a Socialist Market Economy (Cheltenham, uk: Edward Elgar, 2014), at 1; and Nicholas R. Lardy, Markets Over Mao: The Rise of Private Business in China (Washington, dc: Peterson Institute for International Economics, 2014).

26

Constitution of the People’s Republic of China 1982, art. 6.

27

For a brief historical exposition, Li-Wen Lin and Curtis J. Milhaupt, ‘We Are the (National) Champions: Understanding the Mechanisms of State Capitalism in China,’ 65 Stanford Law Review 697 (2013), at 712–16, 735–6.

28

Law on Industrial Enterprises Owned by the Whole People (全民所有制工业企业法) 1998.

29

Company Law (剬司法) 1993. See generally WANG, supra note 25.

30

State Council, Ninth Five-Year Plan for the National Economic and Social Development (国民经济和社会发展’九五’计划), 17 March 1996, para. 7.1.2. See also SHENG Hong and ZHAO Nong, China’s State-Owned Enterprises: Nature, Performance and Reform (Singapore: World Scientific, 2013), at 97.

31

Donald C. Clarke, ‘Corporate governance in China: An overview’, 14(4) China Economic Review 494 (2003), at 496–97. See also SHENG and ZHAO, supra note 30, at 322.

32

CHEN Zongshi, The revival, legitimization and development of private enterprise in China: empowering state capitalism (New York: Palgrave Macmillan, 2015), at 3.

33

See cpc Central Committee, Recommendations for the Tenth Five-Year Plan for Economic and Social Development (关于制定国民经济和社会发展第十个五年规划的建议), 11 October 2000, <http://cpc.people.com.cn/GB/64162/71380/71382/71386/4837946.html>, Chapter 12. See also Dong Junfang and Dong Wei, ‘soes are Still Main Force in “Going Out”’ (国企仍是’走出去’的主力军), China Youth Daily, 3 June 2013, <www.sasac.gov.cn/n1180/n1271/n20515/n2697206/15353880.html>.

34

See Julie Jiang and Jonathan Sinton, ‘Overseas Investments by Chinese National Oil Companies’ (iea Information Paper, 2011); and Janet Xuanli Liao, ‘The Chinese Government and the National Oil Companies (nocs): Who Is the Principal?’, 21 Asia Pacific Business Review 44 (2015) at, 45–46.

35

Lin and Milhaupt, supra note 27, at 704–728.

36

Company Law, supra note 29, art. 64(2).

37

Ibid., art. 67(1).

38

Thus, all wholly state-owned companies are either Central Enterprises or Local Enterprises, whereas the latter two categories include companies that are not wholly state owned.

39

See also FAN Gang and Nicholas C. Hope, ‘The Role of State-Owned Enterprises in the Chinese Economy’, in us-China Economic Relations in the Next Ten Years Towards Deeper Engagement and Mutual Benefit, <www.chinausfocus.com/2022/wp-content/uploads/Part+02-Chapter+16.pdf>; Katy N. Lam, Chinese State-Owned Enterprises in West Africa: Triple-embedded globalization (New York: Routledge, 2017).

40

See the website of the National People’s Congress, ‘Clarifications on the Reform Plan of the State Council Organs’ (关于国务院机构改革方案的说明), 6 March 2003, <www.npc.gov.cn/wxzl/gongbao/2003-04/04/content_5312163.htm>. See also Law on the Assets of Central Enterprises (企业国有资产法) 2008, art. 1; and Company Law, supra note 29, art. 66(1).

41

Lin and Milhaupt, supra note 27, at 734–746. sasac has been characterized as ‘the world’s largest controlling shareholder’. See Marcos Aguiar and others, ‘sasac: China’s Megashareholder’ (bcg Perspectives, 2007).

42

Li-Wen Lin, ‘State Ownership and Corporate Governance in China: An Executive Career Approach’, 3 Columbia Business Law Review 743 (2013).

43

See, e.g., GUO Yidi, Quy Nguyen Huy, and XIAO Zhixing, ‘How middle managers manage the political environment to achieve market goals: Insights from China’s state-owned enterprises’, 38(3) Strategic Management Journal 767 (2016); Arthur R. Kroeber, China’s Economy: What Everyone Needs to Know (Oxford University Press, 2016) at 96.

44

See, e.g., Kjeld Erik Brødsgaard, ‘Politics and Business Group Formation in China: The Party in Control?’, 211 The China Quarterly 624 (2012).

45

Lin, supra note 42, at 773–777.

46

Ibid., at 773.

47

See, e.g., WANG Jiangyu, ‘The Political Logic of Corporate Governance in China’s State-Owned Enterprises’, 47 Cornell International Law Journal 631 (2014).

48

ZHANG Deyong, of the Chinese Academy of Social Sciences Institute of Finance and Economics, cited in WANG Junling, ‘soes Must Make Full Use of “Party Building”’ (国企必须用好”党建”这张王牌), China Daily, 26 October 2016, <http://paper.people.com.cn/rmrbhwb/html/2016-10/26/content_1721534.htm>.

49

BAO Dan, ‘Innovation: The Backbone of China’ (创新:挺起国家脊梁), China Daily, 27 May 2013, <http://politics.people.com.cn/n/2013/0527/c1001-21619868.html>.

50

SHI Ying, ‘The Leading Role of the Party in soes Deepening Reform Cannot be Absent’ (国企深化改革党的领导不能缺位), People’s Daily, 17 October 2016, <http://opinion.china.com.cn/opinion_26_153126.html>. See also LI Xiuping, ‘Build the Party in a Proper Way’ (下好国企党建这盘棋), People’s Daily, 20 January 2017, <http://opinion.people.com.cn/n1/2017/0120/c1003-29037025.html>, claiming that ‘not properly serving the party amounts to dereliction of duty.’

51

See, for instance, XI Jinping’s speech at the National State-Owned Enterprises Party Construction Work Conference (习近平在全国国有企业党的建设工作会议上的讲话), Beijing, 10–11 October 2016, as reported by Chinese official news agency Xinhua on 11 October 2016, <http://news.xinhuanet.com/2016-10/11/c_1119697415.htm>.

52

See Decision of the cpc Central Committee on Deepening the Reform of Several Major Issues (关于全面深化改革若干重大问题的决定), 15 November 2013. For reports in English, see, e.g., Ben Bland, ‘China Plans Shake-up of State-Owned Enterprises to Boost Growth’, Financial Times, 13 September 2015; and Gabriel Wildau, ‘China’s State-Owned Zombie Economy’, Financial Times, 29 February 2016.

53

See FENG, supra note 20.

54

Lin and Milhaupt, supra note 27, at 746, see state ownership as a way ‘to maximize a range of benefits extending from state revenues to technological prowess and from soft power abroad to regime survival at home’.

55

See Wang (‘The Political Logic of Corporate Governance’), supra note 47, at 660–9; Clarke, supra note 31, at 495.

56

Law on Industrial Enterprises Owned by the Whole People 1988, supra note 28, art. 41.

57

See Lin and Milhaupt, supra note 27, at 703; Clarke, supra note 31, at 495. Compare with oecd supra note 19, at 19.

58

A series of examples are cited in SHENG and ZHAO, supra note 30, at 255–258.

59

See e.g. QIN Tianbao and ZHOU Chen, ‘Introduction’, in QIN Tianbao (ed.), Research Handbook on Chinese Environmental Law (Cheltenham, uk: Edward Elgar, 2015), 1 at 10; and Zheng, Milhaupt and Liebman, supra note 24.

60

Wang (‘Chinese State Capitalism’), supra note 23, at 265–7.

61

Ibid. 267–8.

62

China has been the world’s leading coal producer since 1985 and the largest consumer of coal since 1987; see International Energy Agency, Coal Information 2016 (Paris: International Energy Agency, 2016) at xi–xii, xvi–xvii.

63

Henrik Bergsager and Anna Korppoo, China’s State-Owned Enterprises as Climate Policy Actors: The Power and Steel Sectors (Copenhagen: Nordic Council of Ministers, 2013), at 57.

64

Speech by Li Rongrong made at the conference on energy saving and emission reduction in Central Enterprises, 29 August 2007, <www.sasac.gov.cn/gzjg/xcgz/200708290164.htm>.

65

Ibid.

66

sasac, ‘Guidance on the implementation of social responsibility by Central Enterprises’ (关于中央企业履行社会责任的指导意见), 29 December 2007, <www.sasac.gov.cn/n1180/n13307665/n13307681/n13307724/13333515.html>.

67

SASAC, ‘Interim Measures for the Supervision and Administration of Energy Saving and Emission Reduction in Central Enterprises’ (中央企业节能减排监督管理暂行办法), 26 March 2010, <www.sasac.gov.cn/n85881/n85921/n85936/c358206/content.html>.

68

Ibid. art. 6.

69

Ibid. arts. 7(3) and 8.

70

Ibid. art. 9.

71

Ibid. art. 10.

72

Ibid. art. 11(1).

73

Ibid. art. 11(2).

74

Ibid. art. 12.

75

Ibid. arts. 14–18.

76

Ibid. art. 17(2).

77

Ibid. Annex 1.

78

Ibid. art. 7(1).

79

Ibid. art. 19.

80

Ibid. art. 21.

81

Ibid. art. 22–24.

82

Ibid. arts. 19 and 22.

83

Ibid. arts. 25–29 (‘节能减排优秀企业奖’).

84

sasac, ‘Decision on the Eleventh Five-Year Excellent Enterprise for Energy Conservation and Emission Reduction Award’ (关于表彰’十一五’中央企业节能减排优秀企业的决定), 25 May 2011, <www.sasac.gov.cn/n1180/n1566/n257060/n257188/13603251.html>.

85

Ibid, para. 2.

86

See State Grid, ‘State Grid Has been Awarded A in Performance Assessment by sasac in Twelve Years and Four Terms consecutively’ (剬司连续十二年和连续四个任期荣获国资委经营业绩考核A级), 15 June 2016, <www.sgcc.com.cn/xwzx/gsyw/2016/07/334666.shtml>; Datang Power Fuel, ‘Datang Power Fuel Has Successfully Fulfilled the Target of Obtaining Double A and Was Awarded with Outstanding Performance in Enterprise Operation and Energy Conservation and Emissions Reduction’ (集团剬司圆满实现 ‘保双A’目标并荣获任期经营业绩,节能减排优秀企业奖), 21 July 2016, <www.cdt-rl.com/index.php?c=article&id=1637>.

87

See ndrc, ‘China’s Policies and Actions on Climate Change 2015’ (中国应对气候变化的政策与行动2015年度报告), November 2015, <http://en.ccchina.gov.cn/archiver/ccchinaen/UpFile/Files/Default/20151120095849657206.pdf>, at 49.

88

Expert conference on soes energy conservation and emissions reduction, organized by sasac, held on 12 See report by sasac, ‘sasac meeting of members of the Central Enterprises of energy conservation and emission reduction’ (国资委召开中央企业节能减排专家库成员第一次会议), 14 November 2013, <www.cnacgc.com/t_second/index.aspx?nodeid=360&page=ContentPage&contentid=3109>.

89

sasac, ‘Measures for the Assessment of Business Performance of Personnel in Charge of Central Enterprises’ (中央企业负责人经营业绩考核办法), 8 December 2016, <www.sasac.gov.cn/n85881/n85921/c2504293/content.html>, art. 43.

90

State Council, ‘Comprehensive Working Plan on Energy Conservation and Emissions Reduction under the 13th Five-Year Plan’ (‘十三五’节能减排综合工作方案), 20 December 2016, <www.gov.cn/zhengce/content/2017-01/05/content_5156789.htm>; and ‘Comprehensive Working Plan on Energy Conservation and Emissions Reduction under the 12th Five-Year Plan’ (‘十二五’节能减排综合性工作方案), 31 August 2011, <www.gov.cn/zwgk/2011-09/07/content_1941731.htm>, para. 4.

91

See State Council (2016, energy working plan), supra note 90, para. 41; and State Council (2011, energy working plan), supra note 90, para. 33.

92

ndrc, ‘Action Plan on Energy Conservation and Low Carbon Operation for Tens of Thousands Enterprises’ (万家企业节能低碳行动实施方案), 12 November 2011, <www.sdpc.gov.cn/zcfb/zcfbtz/201112/W020111229589358952455.pdf>.

93

State Council, ‘2014–2015 Energy-Saving Emission Reduction Low-Carbon Development Action Programme’ (2014–2015 年节能减排低碳发展行动方案), 15 May 2014, <www.gov.cn/zhengce/content/2014-05/26/content_8824.htm>, para. 29.

94

ndrc, ‘Announcement of the National Development and Reform Commission of the People’s Republic of China’ (国家发展和改革委员会剬告), 2015, <www.ndrc.gov.cn/zcfb/zcfbgg/201601/t20160107_770722.html>. While this suggests that Central Enterprises have made greater efforts than other enterprises, no definitive conclusion can be drawn without a more thorough analysis to eliminate a range of possible biases.

95

Press Conference of the ndrc and the Ministry of Environmental Protection on the 13th Five-Year Plan, 5 January 2017, <www.sdpc.gov.cn/xwzx/xwfb/201701/t20170105_834503.html>.

96

Milhaupt and Zheng, supra note 19, at 681–2.

97

Wang (‘Chinese State Capitalism’), supra note 23, at 269–277.

98

David G. Victor, David R. Hults, and Mark C. Thurber, ‘Introduction and Overview’, in David G. Victor, David R. Hults, and Mark C. Thurber (eds.), Oil and Governance: State-Owned Enterprises and the World Energy Supply (Cambridge, uk: Cambridge University Press, 2012) 3, at 3. The us Energy Information Administration attributes 58% of global oil production to soes.

99

International Energy Agency, World Energy Outlook 2014 (iea Publications), at 56–57.

100

See Mikael Mattlin, ‘The Chinese Government’s New Approach to Ownership and Financial Control of Strategic State-Owned Enterprises’ (bofit Discussion Paper No.10, 2007), <www.suomenpankki.fi/bofit_en/tutkimus/tutkimusjulkaisut/dp/Documents/dp1007.pdf>, at 16. See also Monique Taylor, ‘China’s Oil Industry: “Corporate Governance with Chinese Characteristics”’, in XU Yichong (ed.), The Political Economy of State-Owned Enterprises in China and India (Basingstoke, uk: Palgrave Macmillian, 2012), at 69–93.

101

See, e.g., JIANG Binbin, ‘China National Petroleum Corporation (cnpc): A Balancing Act between Enterprise and Government’, in Victor, Hults, and Thurber (eds.), supra note 98, at 382.

102

See, e.g., iea, World Energy Outlook 2016, at 229.

103

Richard Heede, ‘Tracing Anthropogenic Carbon Dioxide and Methane Emissions to Fossil Fuel and Cement Producers, 1854–2010’, 122(1) Climate Change 229 (2014).

104

Australia and the United Kingdom emitted respectively 562 and 572 Mt CO 2 eq. in 2010, while China emitted 10,108 Mt CO 2 eq. (excluding lulucf), according to the World Resources Institute cait Climate Data Explorer.

105

The coal production by the whole Shenhua Group was estimated at 395 Mt in 2016, according to China Shenhua 2016 Annual Report (中国神华能源股份有限剬司2016年度报告), 19 March 2017, <www.shenhuachina.com/shenhuaChina/1382682910387/dqbg.shtml>, at 1. The combustion of a ton of coal results in approximately 2 t CO 2 eq., according to the 2006 ipcc Guidelines for National Greenhouse Gas Inventories. This suggests, as a rough estimate, that the combustion of the fuel produced by China Shenhua released around 790 Mt CO 2 eq.

106

See the complementary online data by Heede, supra note 103. As benchmarks, we used the data from the World Resources Institute cait Climate Data Explorer (excluding lulucf).

107

See ndrc (2015), supra note 87, at 37.

108

sasac, supra note 67.

109

See ‘Caring for Climate: The Business Leadership Platform’, A Statement by the Business Leaders of the Caring for Climate Initiative (2007), <http://caringforclimate.org/wp-content/uploads/C4C_Statement.pdf>, para. 7.

110

See Sinopec, ‘2015 Communication on Progress for Sustainable Development’, 29 March 2016, <https://www.unglobalcompact.org/system/attachments/cop_2016/275661/original/Sinopec2015COP.pdf?1460255766>, at 10.

111

See, e.g., Sinopec, ‘Conference on Energy Conservation and Environmental Protection’ (11 March 2016), <http://slof.sinopec.com/slof/csr/save_redu/20160315/news_20160315_283317748995.shtml>.

112

See Sinopec (2016 Communication), supra note 110, at 25, noting that ‘the completion of first phase development of Fuling shale gas can reduce 6 million tonnes of carbon dioxide emission per year’, in addition of reducing local air pollution.

113

Ibid. at 28.

114

Ibid. at 32.

115

Compare with the aggressive push of corporate social responsibility programs on soes, on which see, e.g., Li-Wen Lin, ‘Corporate Social Responsibility in China: Window Dressing or Structural Change?’, 28 Berkeley Journal of International Law 64 (2010).

116

Ibid. at 10.

117

See ‘Low Carbon Development Mode in Carbon-Intensive Industry: Let Us Be Surrounded by Green’ (高碳产业、低碳发展,让绿色伴随你我他), Shanxi’s Daily (25 October 2013), <https://www.shccig.com/newshow.php?id=122807>.

118

Ottmar Edenhofer et al. (eds.), Climate Change 2014: Mitigation of Climate Change (­Working Group iii Contribution to the ipcc Fifth Assessment Report), at 516.

119

iea, World Energy Investment Outlook (2014), at 33.

120

Ibid. at 95.

121

State Council, ‘Energy Development under the 12th Five-Year Plan’ (能源发展’十二五’规划), 1 January 2013, <www.gov.cn/zwgk/2013-01/23/content_2318554.htm>, Chapter iv, Section ii, first paragraph. This position does not seem to have evolved under the 13th Five-Year Plan.

122

See State Council (13th Five-Year Plan, 2016), supra note 18.

123

See State Council, ‘Energy Development under the 13th Five-Year Plan’ (能源发展’十三五’规划), 26 December 2016, <www.ndrc.gov.cn/zcfb/zcfbghwb/201701/W020170117350627940556.pdf>, at 23.

124

See ibid. at 58.

125

See State Council (13th Five-Year Plan, Energy development, 2016), supra note 123, at 25.

126

The Chinese authorities have been strongly criticized by environmental groups for authorizing a build-up of coal plants inconsistently with China’s mitigation commitments. See, for instance, Edward Wong, ‘“Irrational” Coal Plants May Hamper China’s Climate Change Efforts’, New York Times, 7 February 2017.

127

ndrc and nea, ‘Promote the Orderly Development of China’s Coal-Fired Power’ (关于促进我国煤电有序发展的通知), 17 March 2016, <www.sdpc.gov.cn/gzdt/201604/t20160425_798991.html>.

128

See ‘National Energy Administration Issued an Order to Stop the Construction of Newly-Built Thermal Power Units in 13 Provinces and Cities’ (能源局下发13省市新建火电机组停建清单), 16 January 2017, <http://news.bjx.com.cn/html/20170116/803648.shtml>. See also National Energy Board, Circular on Further Regulating and Controlling the Planning and Development of Coal-fired Power Projects (关于进一步调控煤电规划建设的通知), 10 October 2016.

129

See Law on Renewable Energy (可再生能源法(修正案)), revised on 26 December 2009, art. 22.

130

Thus, China Datang established Datang Renewable Power Company in 2004; China Huadian Corporation established Huadian New Energy Development Company in 2007; China Huaneng Group established Huaneng Renewables Corporation in 2002; State Power Investment Corporation established China Power New Energy Development Company in 2006; and China Guodian Corporation acquired China Longyuan Power, incorporated in 1993, which is now the largest wind-energy producer in Asia.

131

See Law on Renewable Energy, supra note 129, art. 14(3). See also Energy Conservation Law (节约能源法), revised in 2016, art. 32.

132

See, e.g., State Grid Corporation of China, Corporate Social Responsibility Report (­February 2016), <www.sgcc.com.cn/images/ywlm/socialresponsiility/brief/2016/08/24/2F6590C1495CD544B95B193DC0982F8D.pdf>, at 5.

133

JIANG Fei, ‘Five New Energy soes Submitted A Joint Letter to the ndrc Criticizing the Curtailment of Wind Power’ (五大新能源国企上书发改委直指弃风限电), News Week, 16 February 2016, <http://finance.china.com.cn/industry/energy/nyyw/20160216/3585930.shtml>.

134

See discussion in Wang (‘Chinese State Capitalism’), supra note 23, at 251.

135

See e.g. ipcc, Climate Change 2014: Mitigation of Climate Change (Working Group iii Contribution to the ipcc Fifth Assessment Report) (Cambridge, uk: Cambridge University Press, 2015), at 757, noting that China produces 46% of the world’s steel.

136

See ibid, at 757–758 and 761.

137

Ministry of Industry and Information Technology of the People’s Republic of China, ‘Plan on Upgrading and Restructuring Steel Industry between 2016 to 2020’ (钢铁工业调整升级规划(2016–2020年)), 28 October 2016, <www.miit.gov.cn/n1146295/n1652858/n1652930/n3757016/c5353943/content.html>.

138

Ministry of Industry and Information Technology, ‘Plan on the Development of Non-ferrous Industry between 2016 to 2020’ (有色金属工业发展规划(2016–2020年)), 28 September 2016, <www.miit.gov.cn/n1146290/n4388791/c5288773/content.html>.

139

YANG Jing, ‘The Era of High-Speed Railway’ (高铁时代), Chinese National Geography, 7 April 2010, <http://mobile.dili360.com/tbch/2010/04071193.shtml>; ZHAO Dan, ‘Chinese High-Speed Railway, the Symbol of Speed’ (中国高铁,高铁速度), China Equipment, 30 December 2013, <www.chinaequip.gov.cn/2013-12/30/c_133005866.htm>.

140

See State Council (2016, energy working plan), supra note 90, para. 3.8.

141

See State Council, ‘Opinion on Promoting the Development of Civil Aviation’ (国务院关于促进民航业发展的若干意见), 8 July 2012, <www.gov.cn/zwgk/2012-07/12/content_2181497.htm>, paras. 11 and 16.

142

For an illustrative us perspective, see us China Economic and Security Review Commission, ‘Report to Congress 2016’, <https://www.uscc.gov/sites/default/files/­annual_reports/2016%20Annual%20Report%20to%20Congress.pdf>, at 91–137. See also Przemyslaw Kowalski and Kateryna Perepechay, ‘International Trade and Investment by State Enterprises’ (oecd Trade Policy Paper No. 184, 2015), <http://dx.doi.org/10.1787/18166873%0A>.

143

See, e.g., Ming Du, ‘When China’s National Champions Go Global: Nothing to Fear but Fear Itself?’, 48 Journal of World Trade 1127 (2014); and Daniel C.K. Chow, ‘How China Promotes Its State-Owned Enterprises at the Expense of Multinational Companies in China and Other Countries’, 41 North Carolina Journal of International Law 455 (2016).

144

See, e.g., Hua Wang and Yanhong Jin, ‘Industrial Ownership and Environmental Performance: Evidence from China’, 36 Environmental and Resource Economics 255 (2007).

145

Peter Lorentzen, Pierre Landry and John Yasuda, ‘Undermining Authoritarian Innovation: The Power of China’s Industrial Giants’, 76 The Journal of Politics 182 (2014).